TMI Blog1982 (8) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 1,000 each, privately placed with them. Each of the debenture-holders was entitled to convert 20% of the value of the debentures held by it into equity shares. Each of the debenture-holders exercised the option to convert to the full extent on May 31, 1979, itself and was allotted the 43.750 shares on June 5, 1979. The shares are more particularly described in Ex. S to the plaint. The suit is filed by two shareholders of the company, members of the Berlia family who are shareholders of the company in a substantial way. The plaint is verbose, even argumentative. It sets out the history of the Berlia shareholding in the company, the freezing order under section 108D of the Companies Act passed in respect thereof, the writ petition filed to quash it, the failure of the company to register further shares of the Berlias, and the proceedings adopted to compel registration thereof. The plaint also sets out the history of the debentures and shares in suit. The plaint challenges the whole issue of the debentures and the issue of the shares upon their conversion. Many of these challenges are not pressed. In considering the challenges that are pressed, it will be necessary to ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain a statement of this right ; ( d )after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company. Explanation. In this sub-section, 'equity share capital' and ' equity shares ' have the same meaning as in section 85. (1A) Notwithstanding anything contained in sub-section (1), the further shares aforesaid may be offered to any persons whether or not those persons include the persons referred to in clause ( a ) of sub-section (1) in any manner whatsoever ( a )if a special resolution to that effect is passed, by the company in general meeting, or ( b )where no such special resolution is passed, if the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the Chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or if the votes cast in favour of the resolution exceed the votes cast against and the Central Govt. is satisfied that the proposal is beneficial to the company. Nothing in the section shall apply to the increase of the subscribed capital of a public company caused by the exercise of an option attached to debentures issued by the company to convert such debentures into shares in the company, provided that the terms of issue of such debentures include a term providing for such option and such term has been approved by the Central Govt. before the issue of the debentures and, in case of debentures other than debentures issued to any institution specified by the Central Govt. in this behalf, such term has also been approved by a special resolution passed by the company in general meeting before the issue of the debentures. Proved facts: Surrounding circumstances. The facts regarding the issue of the debentures and shares have to be appreciated in the light of certain surrounding circumstances commencing with the date, July 11, 1977, when the Company Law Board, in exercise of the powers under section 408 of the Companies Act, appointed 8 persons to hold office as directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to consider steps to be taken to prevent the Berlia group from acquiring shares to gain a controlling interest in the company. The minutes of the meeting are on record. They show that the chairman explained that the Berlias had already registered in their names 68,853 equity shares and they had also got transferred some 6,000 preference shares ; that there was a strong suspicion that most of the transferees of 23,113 equity shares which had been lodged with the company for registration were nominees of the Berlia group ; that according to reports received by the committee, the Berlia group had obtained a total of 1,74,127 proxies as against 1,08,000 mustered by the institutions ; that the Berlias had filed nominations for the appointment of 2 directors on the company's board. In view of the large number of proxies obtained by the Berlias it was obvious to the committee that the Berlias were trying to gain controlling interest in the company and this would be prejudicial to the company's affairs; besides, if the Berlias were able to put their nominees on the company's board they would be able to gain knowledge of all the happenings in the company to further their interests. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1978 (which is not on record) advanced cogent reasons why the Company Law Board should take action, inter alia , under section 108A. The letter stated that the Berlia group had participated in the malpractices of the earlier group in management, the Kapadias. The letter stated that the Berlia group had a large quantity of shares which they had got transferred in their own names or in the names of their nominees. The annual general meeting (AGM) of the company was now scheduled to be held on June 29, 1978. After April 3, 1978, the Berlia group had lodged several transfer applications in respect of equity and preference shares of the company in their names and in the names of their nominees. The shareholders of the company had been issued a circular purported to have been signed by R. M. Goculdas, Chairman of M/s. Dharamsi Morarji Chemical Co. Ltd., R. V. Ramani, Managing Director of Mettur Chemicals and Industrial Corporation Ltd., and S.C.L. Jain, managing director of M/s. Punjab National Fertilisers and Chemicals Ltd. They had been told by Goculdas that he had not signed the circular. They were awaiting replies from the other two gentlemen. The circular recommended to the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the company in order to gain controlling interest in the company; that the Berlia group had lodged proxies numbering over 1,74,500 for the extraordinary general meeting of the company held on April 3, 1978, for the appointment of two of their nominees as directors of the company ; that the Berlia group had been involved in a number of irregularities committed by the Kapadia group in the affairs of the company prior to the appointment by the Central Govt. of persons to hold office as directors of the company under section 408 ; that the Central Govt. was satisfied upon the facts enumerated above and upon the report received from the company that, as a result of the transfer of any share or block of shares of the company, a change in the controlling interest of the company was likely to take place and that such change was prejudicial to the interests of the company. The order directed the company not to to give effect to the transfer of any such shares or block of shares and ( a ) where the transfer of such share or block of shares had already been registered, not to permit the transferee or any nominee or proxy of the transferee to exercise any voting or other rights attached t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to produce the order at the time of the application. On June 27, 1978, the company sent the plaintiffs' attorneys a photostat copy of the freezing order. On June 28, 19 78, this court passed the interim order, inter alia , in these terms: "There would be an injunction in terms of prayer ( c ) on the following conditions. At the meeting to be held on June 29, 1978, or at the adjourned meeting in respect of items 2 and 4 on the agenda of the meeting or any amendment thereof as mentioned by the learned counsel for respondent No. 3 (the draft of which has been handed over to the court and which is taken on file) the petitioners undertake to the court to exercise their voting rights in respect of their 69,633 shares mentioned in para I of the petition and in respect of proxies held by them in respect of which the petitioners are entitled to vote in favour of said items and the said amendment thereof. As regards items 1 and 3 on the said agenda and also as regards those terms or resolution in respect of which notice of moving resolution at the said meeting has been given to the 3rd respondent, the petitioners are at liberty to exercise at the said meeting or adjourned meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares proposed for transfer and register them; and that the Government should confirm and sanction the appointment of the two directors of the Berlias on the company's board. On January 9, 1980, the Supreme Court heard the special leave petition filed by the Union of India in respect of the order on the writ petition. The Supreme Court recorded that the Solicitor-General had made a statement on behalf of the CLB and the Govt. of India that the proposals in the letter written by the plaintiffs' advocates to the CLB were acceptable. Accordingly, the Supreme Court passed an order in terms of the proposals contained in the letter and stated that these were deemed to be the directions of the court. The Supreme Court stated that in view of these final orders, the findings of the trial court would not remain in operation but the final order passed by the trial court would. The special leave petition was allowed to be withdrawn. On January 21,1980, the CLB informed the company of the order passed by the Supreme Court and directed the company to implement fully the proposals in the letter of January 5, 1980, a copy whereof was enclosed. There was considerable correspondence between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan agreement was entered into between ICICI and the company in respect of the sum of Rs. 40 lakhs out of the total loan of Rs. 58 lakhs. On February 9, 1978, and February 13, 1978, respectively, ICICI forwarded to the company cheques for Rs. 20,00,000 each towards the disbursement of the bridging loan of Rs. 40,00,000. On March 8, 1978, ICICI wrote to the company with reference to the loan of Rs. 48 lakhs and sent therewith a draft loan agreement. Article 3(2) of the draft agreement set out the conversion right but left blank the value of the loan which could be converted, the period during which and the price at which the conversion could be effected. On March 17, 1978, the company wrote to the UTI and confirmed acceptance of the terms contained in UTI's letters dated June 17, 1978, April 24, 1978, and March 13, 1978. The letter stated that the company would be grateful if UTI placed with them the deposit of Rs. 50 lakhs. This was done. On May 19, 1978, a meeting was held of the special executives of the institutions. The summary record of its proceedings is on record. The terms of option for the conversion of the loan into equity in respect of the aggregate loan of Rs. 108 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that "......................the offer may be accepted as an additional assistance instead of as an alternative to the consortium term loan.............." The letter went on to say : "......................The committee of directors and the board of directors have earlier felt that a programme of modernisation/expansion/diversification should be drawn up and implemented to improve the long-term profit profile of the company. We would, therefore, seek your help for the first phase of the programme of modernisation in regard to the following : Rs. lakhs Rayon Plant 8 spinning machines 120 Bleaching machine 80 Evaporation systems 25 Miscellaneous 30 255 Anhydrous Sodium Sulphate Plant 100 100 T. Sulphuric Actd Plant 100 Rectifier System Changes 25 Modernisation Programme Cost 480 (Brief note on each item is attached) The above figures are very tentative and detailed estimates are being worked out for placing befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any was expected to show better results from 1978 onwards, and the modernisation scheme was a step in the right direction to improve the long-term profitability of the company, in which UTI had already a substantial stake. It was felt that UTI should extend assistance to the project and ICICI as the lead institution would take up the proposal for further processing for a sanction of the balance assistance required from the other institutions. The consensus was that UTI should sanction the increased assistance of Rs. 300 lakhs and should exercise its conversion option to the extent of 20 per cent during the period January 15, 1978, to June 14, 1980. On June 1, 1978, UTI prepared a note for circulation to its executive committee. It recorded that UTI had circulated the note for consideration at the IIM on May 31, 1978. It reproduced the figures contained in the company's letter dated May 19, 1978, and stated that the figures were tentative and detailed estimates were being worked out by the company. The institutions would carry out an appraisal of the modernisation programme and examine it further. The company had not furnished firm figures regarding the proposed modernisation sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitutes 20 per cent of the assistance of Rs. 300 lakhs the trust has agreed to provide. The shares will be acquired at a price on payment of Rs. 160 per share of Rs. 100 ( i.e , at Rs. 60 premium) or at such premium as may be approved by the Controller of Capital Issues. The period for conversion would be June 15, 1978, to June 14, 1980. The company should approach the Controller of Capital Issues/Government of India for necessary approval." In respect of what transpired between May 29, 1978, and June 1, 1978, there is some evidence on record, of Atmaramani, an officer of UTI, and of Shingal, an officer of ICICI. It does not contain much by way of facts. Some reference will be made to it when dealing with the contentions. I do not consider it necessary to set it out here. On June 2, 1978, the company wrote to UTI in relation to the term loan assistance of Rs. 300 lakhs and the discussions with UTI's Chairman whereat it had learnt that its request had been favourably considered at the IIM of May 31, 1978. The letter recorded that UTI's Chairman had mentioned that the term loan would carry a right to subscribe to shares of the company equivalent to 20% of the term loan at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the value of Rs. 50 lakhs out of the total amount of Rs. 300 lakhs. The terms and conditions stated, inter alia , that ICICI would have the option to convert debentures of Rs. 10 lakhs into shares during the period June 15, 1978, to June 14, 1980. On June 8, 1978, UTI wrote a letter to the company. It is necessary to reproduce it in extenso. "Dear Sir, Financial assistance for the company's modernisation programme. Please refer to our letter No UT-14973/RS(N-14) 78 dated June 1, 1978, agreeing in principle to provide to your company financial assistance of Rs. 300 lakhs jointly with other financial institutions in connection with the company's modernisation programme. In terms of clause (7) of the above letter, the Trust has the right to acquire, in lieu of conversion, fully paid-up equity shares of the company of Rs. 60 lakhs (which is equivalent to 20 per cent. of the debentures agreed to be subscribed by the Trust) at any time during the period June 15, 1978, to June 14, 1980. The amount of 60 lakhs is inclusive of a premium amount of Rs. 22.50 lakhs ( i.e ., premium of Rs. 60 per share of Rs. 100) or such premium as may be approved by the Controller of Capital Iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Rs. 50 lakhs; since UTI had agreed to subscribe to debentures of the value of Rs. 300 lakhs, to be reduced to the extent subscribed for by ICICI and GIC and its subsidiaries, GIC enclosed a letter addressed by it on June 19, 1978, to the company agreeing in principle to so subscribe and authorised UTI to release the said letter to the company at an appropriate time. On June 2, 1978, UTI wrote to GIC to state that GIC's letter addressed to the company had been delivered and necessary action regarding conversion of shares would be taken up shortly. On June 20, 1978, the Controller of Capital Issues wrote to the company consenting to the issue of "51,000 equity shares of Rs. 100 each at the premium of Rs. 60 per share, credited as fully paid up, to ICICI and UTI in conversion of a part of their loan/debentures to the extent of Rs. 81,60,000 (including the premium) out of the loan/debentures sanctioned to the company". On June 23, 1978, the CLB wrote to the company in respect of the application made by the company under section 81(3) of the Companies Act for the approval of the raising of convertible debentures. The letter stated that it was observed from UTI's letter of Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICICI in the sum of Rs. 50 lakhs, GIC and its subsidiaries in the sum of Rs. 50 lakhs and the balance would be provided by UTI. The letter requested that the CLB's letter of approval of August 17, 1978, be amended to include ICICI, GIC and its subsidiaries. On October 5, 1978, the Controller of Capital Issues wrote to the company that the words "ICICI and UTI" in the consent order of June 20, 1978, should be substituted by the words, "ICICI, UTI, GIC and its subsidiaries". On October 5, 1978, the Controller of Capital Issues wrote to the company regarding the company's request to increase the amount of premium from Rs. 60 to Rs. 80 per share. The letter stated that the Government had considered the matter in the light of the company's representation but regretted its inability to accede to it. On October 16, 1978, GIC wrote to the company stating its intention to subscribe, along with its subsidiaries, to debentures worth Rs. 50 lakhs out of the total debenture issue of Rs. 300 lakhs. The letter stated the terms and conditions upon which the sanction would be subject to. C1. 4 required the company to agree to vest in GIC and its subsidiaries the option to acquire, in lieu of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 108,00,000 13,500 21,60,000 UTI 250,00,000 31,250 50,00,000 GIC and sits subsidiaries 50,00,000 6,250 10,00,000 408,00,000 51,000 81,60,000." On February 6, 1979, the CLB wrote to the company a letter approving the issue of convertible debentures of Rs. 50 lakhs out of total debentures of the value of Rs. 250 lakhs to be issued to UTI, convertible at Rs. 160 per share during the period June 15, 1978, to June 14, 1980. A similar letter approved the issue of convertible debentures of the value of Rs. 50 lakhs to be issued to the ICICI. On April 7, 1979, M/s. Amarchand Mangaldas Hiralal Shroff Co., the common attorneys for the institutions and the company, wrote to the institutions, the company and the debenture trustee with reference to the previous correspondence and a joint meeting and enclosed therewith a note of the discussion thereat. One of the items discussed was that the company would take steps to approach the CLB for a modification of the sanction granted under section 81 so as to clearly specify that the convertible debentures would be to the extent of Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 31, 1979. For ready reference, the attorneys enclosed a short note on the points for completion of the transaction. Item 1 of the note stated that the company had to furnish to each of the debentureholders, the debenture trustee and the attorneys, certified copies of the board resolutions passed by the directors in connection with, inter alia , the acceptance of notices of conversion, entering into of contracts under section 75 of the Companies Act, issue of equity shares upon conversion and other related matters. Item 3 referred to the execution of the debenture trust deed and the affixing thereon of the company's seal. Item 8 stated that UTI and ICICI would issue letters of adjustment in respect of the advances made by them towards the debenture subscription and also issue cheques for the balance amount and apply for subscription of the debentures. Item 9 stated that GIC and its subsidiaries would also apply for subscription and issue requisite cheques for the value of the debentures to be subscribed for by them. Item 10 stated that the company would issue letters of allotment of debentures to the debentureholders. Item 11 stated that after the letters of allotment were receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recited. The requisite resolutions passed by the company's board are recited. Reference is also made to the consents or permissions received from the various authorities. The last recital states that the debenture trustee had, at the request of the company, "consented to act as trustees of these presents and for the benefit of the debenture-holders on the terms and conditions hereinafter appearing". Clause 1 of the debenture trust deed defines the "debentures" to mean "the debentures of the company issued under these presents...in accordance with the forms set out in Parts I to VII respectively of the Fifth Schedule hereunder written under the provisions of and secured by these presents.............." The "debenture holders" are defined to mean "the holders for the time being of the debentures so issued............on the conditions endorsed on the debentures............" Under clause 2, the debentures "issued hereunder and which are entitled to the benefit of these presents" are 35,000 11% convertible debentures of the nominal amount of Rs. 1,000 each and comprised of 25,000 series "A" debentures, 5,000 series "B" debentures, 1,000 debentures each of series C, D, E, F and G, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid up equity shares as aforesaid." Under clause 34, the company is required to maintain at its registered office a register of the debentureholders showing, inter alia , the name and address of each holder, the nominal amounts of the debentures held by him, the date on which his name was entered in the register as a debenture-holder, the date on which he ceased to be a debentureholder and subsequent transfers and changes of ownership. Under sub-clause (B) of clause 34, the company was required to issue in the first instance, within a period of three months from the date of allotment, to each debentureholder, free of charge, a debenture certificate in respect of his holding showing on the face thereof the denomination, number and the amount of debentures. Under sub-clause (C) of clause 36, the company was obliged to duly observe and perform all the terms and conditions contained in the loan agreements and not to commit any breach or default thereof. The Fifth Schedule of the debenture trust deed sets out the form of debentures to be issued to the institutions. Part I relates to the series A debentures to be issued to UTI. Clause 5 thereof sets out the mode and form in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The letter requested the issue of the letter of allotment of debentures and stated that UTI would be entering into a separate contract with the company for the allotment of equity shares on exercise of UTI's option for conversion. The cheque is on record and has been deposed to by Atmaramani. The letters of allotment of debentures are not on record. The notices of conversion given by the institutions to the company are on record. The notice of conversion issued by UTI may be reproduced in full: "Dear Sirs, Re : Subscription to convertible debentures of Rs. 2.50 crores option of conversion exercise of. Pursuant to our application for subscription in respect of 25,000 convertible debentures of Rs. 1,000 each of the aggregate face value of Rs. 2,50,00,000 (Rupees two crores fifty lakhs only) on the 31st day of May, 1979, accompanied by the remittances of the unsubscribed portion being Rs. 175 lakhs and by way of an adjustment against the advance deposit being Rs. 75 lakhs your company has agreed to issue a letter of allotment whereby you would be allotting to us 25,000 convertible debentures of Rs. 1,000 each of your company. Pursuant to the letter of intent No. UT / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was instructed by UTI's legal dept. to keep an amount of Rs. 175 lakhs ready for subscription towards the debentures of the company, for, he was told that it was likely that on 31st May, 1979, or 1st June, 1979, the company would execute the debenture trust deed and other documents. In cross-examination he stated that he had been instructed by Shankar, of UTI's legal dept., to keep this money ready for subscription towards the debentures three or four days before 31st May, 1979, and that this was the first time he had been so told. On 30th May, 1979, he had sent a note instructing UTI's accounts dept. to keep the moneys ready on 1st June, 1979, for, he had been told that that was the day on which the company would execute the document. The note is on record. It required that he should be sent the cheque by 4-00 p.m. on 31st May, 1979, but he deposed that he called for it after lunch on 31st May, 1979. He was not present at the meeting of 31st May, 1979, but had handed over the letter of subscription to the debentures, the cheque and the notice of conversion, all signed by him, to Poojara, one of UTI's officers. On 5th June, 1979, shares pursuant to the conversions were allotted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the majority of the company are entitled to do legally, there can be no use in having a litigation about it, the ultimate end of which is only that a meeting has to be called, and then ultimately the majority gets its wishes. Is it not better that the rule should be adhered to that if it is a thing which the majority are the masters of, the majority in substance shall be entitled to have their will followed ? If it is a matter of that nature, it only comes to this, that the majority are the only persons who can complain that a thing which they are entitled to do has been done irregularly ; and that, as I understand it, is what has been decided by the cases of Mozley v. Alston [1847] 1 Ph 790 and Fossv. Harbottle [1843] 2 Hare 461." In Burland v. Earle [1902] AC 83, the Privy Council said that it was an elementary principle of the law relating to joint stock companies that the court would not interfere with the internal management of companies acting within their powers, and in fact had no jurisdiction to do so. Again, it was clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied and the suit, having been filed by the plaintiffs in an individual capacity, was not maintainable or, at any rate, the plaintiffs were not entitled to relief therein. It was contended by Mr. Cooper, learned counsel for the plaintiffs, that the right to rectify the share register of a company was the individual right of each of its shareholders. Each shareholder was entitled to have the register reflect the true position and to take action to ensure that it did. In Mr. Cooper's submission, the shareholder's right to vote, his right to a share in the company's profits and his right to acquire new shares in the company depended upon the entries in the company's share register. In his submission, the individual shareholder's right to rectify the company's share register was recognised by section 155 of the Companies Act. Reference was made in this context to an unreported judgment of a Division Bench of this court in Appeal No. 344 of 1981 in Company Application No. 169 of 1981, in Company Petition No. 196 of 1981, delivered on 9th September, 1981 since reported as Killick Nixon Ltd. v. Dhanraj Mills Pvt. Ltd. [1983] 54 Comp. Cas. 432 (Bom.). It was there contended that only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the scope of its pecuniary jurisdiction. The suit, which was valued at Rs. 1,300, was, therefore, dismissed. Counsel for the defendants relied upon this judgment to submit that different considerations applied to a petition under section 155 and to a suit for the same relief. Mr. Cooper relied upon the judgment to submit that the relief of rectification was a relief available at common law. Reference was also made to the judgment in T. A. K. Mohideen Pichai Taraganar v. Tinnevelly Mills Co. Ltd., AIR 1928 Mad 571. The court held that the true and correct view to take would be that the Companies Act merely legislated for or regulated rights recognised under the common law; this observation was made in the context of section 38 of the Indian Companies Act, 1913, which provided for a rectification of the share register. In my view, every shareholder of a company has an individual right and interest in seeing that the share register of the company reflects the true position. Upon the share register rests each shareholder's right to receive his due share of the company's profits by way of dividend, his right to exercise his vote and to have it correctly assessed as agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sought, for, the debenture trustee, a necessary party, was not impleaded. If the court comes to the finding that the issue of the shares in suit is bad and restores the institutions to the position of being debenture holders, rectification of the debenture register will be a necessary consequence of the order. It need not be prayed for nor is it requisite that the debenture trustee be heard in that regard. Debenture trustee a necessary party It was urged, first, that the debenture trustee was a necessary party upon the averments in the plaint, notwithstanding the fact that the plaintiffs had given up the contentions that made the debenture trustee a necessary party. I cannot agree, that, though no contention is urged regarding which it is requisite to hear the debenture trustee, by reason of the frame of the suit, it must be held to be bad for non-joinder. Secondly, it was urged that if the institutions were restored to the position of being debenture holders the debenture trustee would hold the same security for a larger number of debenture holders than heretofore and that, therefore, the debenture trustee is a necessary party. That does not, in my view, make the debentu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificates in respect of which the option of conversion was exercised had to be sent to the company along with the notice of conversion. It was submitted that it was imperative that such debentures as were being converted should be identified, for, all debentures were called convertible but what really made them convertible was the fact of their being sent to the company. This being, in his submission, a matter of substance not of form, there could be no waiver of that which made the debentures convertible. Clauses 4 and 23 of the debenture trust deed and clause 5 of the form of debentures have already been quoted in extenso. Clause 4 states that the debenture holder would be entitled to call for the allotment of shares in respect of such debentures "for which the right is so exercised" by the debenture holder "in the manner set out in the form of debentures in the 5th Schedule hereunder written". The form of debentures requires the delivery to the registered office of the company of a notice of conversion of not less than one month "accompanied by the relative debenture certificate" and states that the debenture holder shall be entitled to call for allotment "in respect of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institutions had been registered as debenture holders at the point of time at which they had exercised the option. He relied upon section 106 of the Evidence Act and urged that, since the point of time at which the names of the institutions were entered in the company's register of debenture holders was within the company's knowledge, the onus lay on the company to prove when this was done ; but the company had led no such evidence. It does not appear to be the argument of the defendents that the institutions' names were entered on the register of debenture holders before they exercised the option to convert. The case of the defendents is that the company waived its right to insist that the option could be exercised only after the institutions' names were entered upon the register. In find it difficult to agree with Mr. Cooper's submission that the right or option to convert came to exist only upon registration. Basically, the requirement is set out for the company's benefit, as describing a debenture holder who has been recognised by the company by virtue of the fact that his name has been entered by the company in its register of debenture holders in respect of his debenture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on May 31, 1979, the debenture trust deed was first executed, letters of allotment of debentures were then issued and thereafter the institutions exercised their options. In view of these averments in the plaint, I must uphold the objection on behalf of the defendants that it is not open to the plaintiffs to urge that letters of allotment of debentures were not issued before the institutions exercised the opitions. Purchase of shares Mr. Cooper urged that the transaction that took place at the meeting of May 31, 1979, was not the issue of debentures for the whole amount of Rs. 350 lakhs and the exercise of the option to convert, but was, to the extent of 80%, the giving of a loan and the issue of debentures and, as regards the balance 20%, it was the payment of application monies and the purchase of shares. He urged that the transaction of May 31, 1979, had to be seen as one and indivisible and in its reality. Reference was made by Mr. Cooper to the judgment of the Court of Appeal in Manks v. Whiteley [1912] 1 Ch. 735. What was relied upon comes from the judgment of Fletcher Moulton L.J. It runs : ".....................But I say it to emphasize the principle that wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was signed. It contained clause 4, conferring the right of conversion, and clause 36( c ), which required the company to duly observe and perform all the terms and conditions, covenants and stipulations contained in the loan agreements. By reason of clause 36( c ) the right to acquire shares in lieu of conversion was incorporated into the debenture trust deed. On subscription to the debentures and their allotment the institutions acquired the right of conversion and, simultaneously, the right to purchase shares in lieu of the right of conversion became effective. The institutions purported to exercise the right of conversion or, at least, claimed they were during so. This was not correct because a true exercise of the right meant the giving of a real loan intended to be used by the borrower. Really, it was the exercise of a right to purchase. The real transaction between the institutions and the company was not the giving of the loan of Rs. 300 lakhs and the conversion thereof into shares but was the giving of a loan plus the purchase of shares. This transaction was contemplated by the debenture trust deed and would have been a valid transaction if there had been a special resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvert debentures. The emphasis of the argument is on the fact that the options were exercised immediately they came into existence. There was Mr. Cooper submitted, no loan in respect of Rs. 70 lakhs (20% of the total of Rs. 350 lakhs) for the essence of a loan was that the borrower was given the use of it, but it was paid as application monies for shares. To uphold the argument would mean to read into clause 4 of the debenture trust deed and, indeed, into section 81 a term that the conversion could not be effected or the option could not be exercised until after a reasonable period of time. This would, in my view, be unjustified. I see no bar under the law to the exercise of an option immediately after it comes into existence, and the allotment of shares pursuant to such conversion cannot on that account be voided. It may also be pointed out that the agreements to allot shares mention that interest would be payable upon the debentures until the shares in conversion thereof were issued. This also goes to establish that Rs. 70 lakhs were not paid, to begin with, as application monies but were intended to be a loan on which interest at the debenture rate was payable until share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaint. It was contended by counsel on behalf of the defendants that, assuming that there was such a plea, there were no particulars of the mala fides alleged therein. Let me look through the plaint. The relevant portion begins with para 71. The opening sentence of para 71 reads: "The plaintiffs say that it is thus apparent from the aforesaid facts and those stated hereinafter and in the other suits that there has been consistent and persistent attempt on the part of the Government directors whilst they were acting as the financial institution directors to prevent the lawful exercise of voting by ordinary citizens and to capture more and more voting powers for themselves and prevent the voting power being acquired by any other individual except those who were willing to support them and thus exercise control over the company." The paragraph goes on : "...................With this very motive on 31-5-1979 the debentures were privately placed and issued to the financial institutions and loans raised from them both of which gave an option to the financial institutions to obtain and acquire shares by exercising such option to the extent of 51,000 shares........ On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption. Only if this was done and the circumstances led to the irresistible inference of mala fides and breach of fiduciary duty would the onus shift to establish the contrary. A presumption of fact determines where the burden of proof lies. Quite apart from the presumption that the directors act bona fide and that, therefore, the burden of proof lies on the plaintiffs, the burden of proving mala fides must rest on the party alleging it. The presumption here would stand rebutted and the evidentiary burden would be satisfied if the plaintiffs made out a prima facie case, a case upon which, in the absence of evidence from the other side, a finding in their favour could reasonably be given upon a balance of the probabilities. The absence of evidence from the other side entitles the court to infer that "the absence of that evidence is to be accounted for by the fact that even if it were adduced it would not displace the prima facie case. But that always presupposes that a prima facie case has been established..." (Cockburn C.J. in McQueen v. Great Western Rail Co. [1875] LR 10 QB 569 at 574). It must also be remembered that animus can only rarely be proved by direct evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or oppose the passing of the accounts, and so on ; but they knew that they could not expect support from the Berlias. That there was one nominee of the institutions and one employee of LIC on the company's board; seven other directors were government nominees. That the AGM having been called for June 28, 1979, by notice dated April 26, 1979, it was not possible to obtain additional voting strength except by waiving the one month's notice period and the other requirements for conversion. That the company had been in terms informed orally as well as by the letter written by the common attorneys that the institutions wanted the shares upon conversion by the end of May, 1979. That the debentures could not have been issued till the debenture trust deed was registered with the Sub-Registrar of Assurances and the certificate of registration of the charge was obtained from the Registrar of Companies and incorporated in the debentures as provided by the form of debentures. That in para 73(2) of the plaint, it was alleged that the Government nominated directors stood to gain by lending support to the institutions and to submit to their demands, for, there was a quid pro quo, inas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1976 and continued in 1977 and 1978; in 1979 it continued but had abated to some extent. It is not as if it was Atmaramani's evidence that the urgency had ceased in 1979 so that it was necessary to put to him such an express case. In any event, the submission would have acquired substance if the company had examined a director or officer and the express case had not been put to him. Counsel for the defendants made reference to the period after April 7, 1979, and submitted that the conduct of the defendants belied the inference that the waiver was premeditated or was the result of any apprehension about the Berlias' intentions. Reliance was placed on the letter of April 7, 1979, written by the common attorneys to the institutions and the company wherein it was stated that the institutions were anxious to complete the transaction at the latest by May 30, 1979. It was pointed out that on that day the 1979 AGM had not been notified and the sanctions of the various authorities to the issue of the debentures were still to come. On April 26, 1979, the company notified the AG.M for June 29, 1979. It was submitted that this could have been delayed. The sanctions were yet to come. If an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enforced. Why, then, was the draft debenture trust deed not amended by deleting clause 5 ? Why was the debentures trust deed executed making compliance with clause 5 a pre-requisite for conversion and why, immediately upon its execution, was the pre-requisite waived ? Most important to notice in this regard is that it was agreed that all the institutions were to exercise on May 31, 1979, their rights of conversion to the fullest extent so that clause 5 was not being retained to be operative in the event of a future exercise of the option. Counsel for the defendants submitted as part of the earlier argument that, that the company had called the AGM for June 28, 1979, was a fact, which militated against its alleged intention to ensure that the institutions were issued the shares upon conversion before it. Counsel relied upon section 166 of the Companies Act and said, the AGM could have been delayed till September, 1979, by which time the institutions could have got the shares without recourse to waiver. It seems to me that Mr. Cooper was right when he submitted that, having regard to section 210 the AGM had to be called by June 30, 1979, to adopt the company's profit and loss a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence to support that case. First, if the directors did what they did because they considered the Berlias undesirable persons, they did what they did with the intention that the Berlias should be outvoted. In para 73( e ) of the plaint it is alleged that it was obvious that continuous efforts were made by the company's directors for the time being to deprive the Berlias and other shareholders of voting power and to prevent the Berlias and others from acquiring voting power, and that the directors acted, in the manner they did, so as to acquire voting power for the institutions which they represented or were interested in. In para. 69 of the written statement of the company it is denied that an effort was made by the directors to deprive the Berlias or other shareholders of their voting power or to prevent the Berlias or other shareholders from acquiring voting power or that the directors acted so as to acquire voting power for the financial institutions. In view of this denial, the argument, that the directors did what they did because they considered the Berlias undesirable people, cannot be put forward to justify what the directors did. Secondly, as will be evident from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary that the Berlias and their supporters should be prevented from gaining control of the company and action should be taken fast under various provisions of the Companies Act to that end. On May 29, 1978, the company replied to UTI's letter of May 19, 1978, and stated that, while it was grateful for UTI's offer of Rs. 1 crore it could be accepted only as an additional assistance instead of as an alternative to the consortium term loan. The company said that it would be grateful if UTI gave its assistance in the sum of Rs. 3 crores because it wanted to take up a modernisation programme. What was said about that modernisation programme was said to be very tentative and detailed estimates were being worked out. The note annexed to the letter upon the modernisation programme is patently, as tentative. On May 17, 1978, no plea had been made by the company to UTI for assistance in the sum of Rs. 1 crore. The company, in fact, said that it was securing such assistance from a consortium of banks. On May 19, 1978, with rather remarkable solicitude and expedition, UTI offered the company, the same amount for the same purpose. No doubt an institution with a large stake in the company m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is a strain on one's credulity to be asked to believe that to oblige the company in this, a public financial institution agreed in principle to advance first Rs. 200 lakhs and then Rs. 300 lakhs within two days, without an appraisal of the project, of which only the sketchiest details and figures were provided by the applicant. Atmaramani even claimed to read urgency in the company's letters which plainly was not there. The company had not asked for any moneys for the modernisation programme until after UTI's letter of May 19, 1978, there plainly, was no urgency for the moneys and no properly evolved proposal upon which they could have immediately been spent. It is on record that at the IIM of May 31, 1978, the proposal of UTI to advance to the company Rs. 200 lakhs was considered and was modified so that UTI would now advance to the company Rs. 300 lakhs. Shingal deposed that the general procedure of the institutions was that a detailed appraisal of the proposal for financial assistance was carried out by the institutions before acceptance of the proposal, even in principle. He insisted in cross-examination that in the present case that procedure had been followed, but it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquire with effect from June 15, 1978, in lieu of conversion" shares of the value of Rs. 10 lakhs. The letter said that such equity shares were to be "registered in the name of UTI immediately on allotment, i.e ., from June 15, 1978". Once again, the urgent desire to acquire as many shares as possible is writ large upon the latter. On June 8, 1978, UTI wrote to the company in respect of the letter of intent dated June 1, 1978, and stated that, in terms of clause (7) thereof, it had the right to acquire, in lieu of conversion, shares of the value of Rs. 60 lakhs. The letter advised that such shares were required to be registered in the name of UTI immediately on allotment, i.e ., from June 15, 1978. This letter is on the same lines as those that succeeded the company's letter of May 29, 1978, UTI wanted the company's shares as fast as it could get them and was quite willing in the bargain to advance Rs. 300 lakhs for a project the company had not finalised and which the institutions could not, and had not investigated. On June 17, 1979, the freezing order was passed. A copy was received by the company on June 19, 1978. It is in evidence that the company did not disclose to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benture trust deed being executed and letters of allotment of debentures being issued. It also contemplated that letters of allotment of shares in conversion and contracts under section 75 in respect of those shares would be executed and issued. In fact, it contemplated the issue of the shares themselves. It is obvious that prior to May 29, 1979, it had been agreed between the institutions and the company that, immediately upon the debenture trust deed being executed, clause 5 of the form of debentures incorporated therein would be waived. There is nothing upon the record which indicates when such agreement was reached or why. On May 31, 1979, the transaction was completed. No evidence has been led of what happened then. Upon a consideration of the circumstances relied upon by Mr. Cooper, by counsel for the defendants and of the record, I cannot but see that the company had sought to prevent the Berlias from adding to their shareholding in the company and from exercising their votes on their existing shares and on proxies secured by them, that the Berlias had the capacity to muster a sufficiently large number of proxies to worry the company's directors and the institutions, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wishes of the existing majority of shareholders." Mahajan J. held that the controlling factor working in the mind of the directors was the necessity of further funds for the company at the moment they passed the resolution. That being so, the existence of the other motive did not make the action of the directors in respect of the issue of further shares mala fide . Upon the evidence he found that there was no dolus malus in their mind as directors of the company, as affecting the company or its shareholders. Das J. put it this way (p. 207): "If the directors exercise the power for the benefit of the company and at the same time they have a subsidiary motive which in no way affects the company or its interests or the existing shareholders then the very basis of interference of the court is absent, for........................ the court of equity only intervenes in order to prevent a breach of trust on the part of the directors and to protect the cestui que trust, namely, the company and possibly the existing shareholders". He held that the directors' motive of keeping out the Singhania group, who were not yet shareholders but were strangers, did not prejudicially affect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of the company the decision to issue shares could not be struck down on the ground that it had incidentally benefited the directors in their capacity as shareholders. It is true that, it was the case of the plaintiffs here that the shares had been issued though there was no need for the finance, and that, that case was not urged in the course of Mr. Cooper's final argument. I am, therefore, concerned not with whether the directors issued shares mala fide or in breach of fiduciary duty, but with whether they acted mala fide in breach of the fiduciary duty in waiving the requirement of clause 5 of the form of debentures, thus enabling the shares to be allotted to the institutions earlier than the prescribed one month's period. There is, to repeat, no evidence which refutes the prima facie case of mala fides and breach of fiduciary duty made out. There is no evidence before me upon which I can conclude, in the words of the Privy Council that the directors truly and reasonably believed that what they did was for the interest of the company. If they had given such evidence it would not have been possible for the plaintiffs' counsel to argue or for the court to hold that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed to increase the subscribed capital of the company by allotment of further shares". It was only (when) the increase in the subscribed capital, by allotment of further shares, had been decided upon, that sub-section (1) came into play. Sub-section (1A) began with the words "notwithstanding anything contained in sub-section (1) the further shares aforesaid may be offered to any persons" if a special resolution was passed. Since the words used in the sub-section were "the further shares aforesaid", it necessarily followed that the further shares referred to were those which fell within the scope of the clause, when it was proposed to increase the subscribed capital of the company by the allotment of "further shares" and the further shares aforesaid in the clause meant such further shares'. It could be suggested that, sub-section (1) only came into play, and could refer only to the point of time, at which the further shares were to be offered, and that the sub-section could only be applicable to shares to be issued as a result of the exercise of an option clause in a convertible debenture, if the sanction by the special resolution was given before the option was inserted as a coven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only a supporting document and it was open to the company to pass a special resolution before issuing the debentures themselves and accepting the subscription moneys. The fact that, in the instant case, it was all done on the same day did not alter this position, because the argument proceeded on the footing that everything done had been done bona fide and the transaction was what it had been made out to be. I proceed to consider Mr. Cooper's reply. If the phrase impugned is excluded from clause ( b ) of the proviso to sub-section (3) of section 81, the term providing for the option to convert the debentures into shares had to be ( sic ) approval meeting. There is no such approval. Does it mean, then, that section 80 applies ? As section reads, what would apply is sub-section (1A), for, the shares were not being offered to all the holders of the company's equity shares. Sub-section (1A) authorises the offer of shares to any person if a special resolution to that effect is passed. It makes the special resolution a precondition to the offer or the option. Without the special resolution the offer or the option is bad. It would mean, in the instant case, that there being no special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1 debentures are defined to mean the debentures issued under "these presents and in accordance with the forms set out in the Fifth Schedule". The debenture holders are defined to mean the holders for the time being of the debentures so issued on the conditions endorsed on the debentures. Under clause 2 it is stated that the debentures issued under the debenture trust deed and which were entitled to its benefit would be 35,000, 11% convertible debentures comprised in series A to G. Clause 4 of the debenture trust deed provides the right of conversion and clause 5 of the form of debentures provides the mode in which the right may be exercised. Both these have been quoted above. It is patent, therefore, first, that the debentures were to be issued under the debenture trust deed and, secondly, that the debenture trustee accepted the assignment on the terms and conditions contained in the debenture trust deed, including the terms of conversion. The option to convert therein is not made subject to the sanction of a special resolution but is unqualified. To read into it this qualification would, in my view, be unjustified, the more so as it would be done without hearing the debenture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and the company wrote to them regarding discussions that had been held earlier. It was recorded by the attorneys that the company would take steps to approach the CLB for modification of the approvals so as to clearly specify that the convertible debentures would be to the extent of Rs. 350 lakhs in the aggregate and not only Rs. 70 lakhs as stated therein. The letters to the CLB pursuant to this discussion were written not by the company but by the institutions. On May 19, 1979, the CLB replied to GIC and stated that in the approval it had been clearly stated that debentures of the value of Rs. 10 lakhs would be convertible. Replies in similar terms were sent to the other institutions. It is true that what the company has done is to issue convertible debentures of the aggregate amount of Rs. 350 lakhs of which only 20% in value are convertible. The effect of doing so is the same, substantially, as of issuing non-convertible debentures of the value of Rs. 280 lakhs and convertible debentures of the value of Rs. 70 lakhs. Acquiescence, laches and ratification Counsel for the defendants argued that relief in favour of the plaintiffs should not, in any event, be given by re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt the transaction. In re New Zealand Banking Corporation, [1868] 3 Ch App 131, it was held that it was impossible not to impute to every shareholder of the company the knowledge of what the memorandum of association contained, for, if they chose to address their minds, the shareholders had all the facts that were necessary and when, in the face of that, and with that knowledge, they passed resolutions it was to be considered that they had done what was necessary to cure any irregularity that had been committed. In re Magdalena Steam Navigation Company, 70 English Reports 597, it was held that debentures issued by directors under the seal of their company without due authority could not be enforced by members of the company who accepted them after having been present at the meeting where the issue of the irregular debentures was sanctioned; and bona fide transferees for value from such shareholders were in no better position. Neither could strangers enforce them as valid legal securities. But where the moneys advanced on such irregular securities had been applied by the directors for the benefit of the company, and the shareholders had acquiesced in the transaction, the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been completed did not change the part, and the right of action once vested could not as a general rule, be divested without accord and satisfaction. Estoppel by acquiescence had no application to an ex post facto submission not amounting to ratification, and inducing no action or omission, and, consequently, insufficient to constitute what in such case would be necessary; accord and satisfaction with full knowledge. Acquiescence after a fait accompli if not prolonged beyond the verge of limitation, was no bar to a right of suit already accrued. In Ghasia v. Thakur Ramsingh, AIR 1927 Nag 180, Kinkhede, A.J.C. said that there was a distinction between a case where the acquiescence alleged occurred while the act acquiesced was in progress, and another where the acquiescence took place after the act had been completed. In the former case, the acquiescence under such circumstances that assent might be reasonably inferred from it. In the latter case, when the act was completed without any knowledge or without any assent on the part of the person whose right was infringed, the matter had to be determined on very different legal considerations. A right of action had then vested in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty v. M.S.A.P.L. Palaniappa Chettiar, AIR 1930 Mad 364, a Division Bench of the Madras High Court observed that (p. 369): "The ground for admitting the defence of acquiescence or laches according to the doctrine of the English Courts of equity is that a plaintiff in equity is bound to prosecute his claim without undue delay. Where, however, there is, as in India, a statutory time limit to all conceivable kinds of action, the plaintiff is entitled to the full statutory period before his claim becomes unenforceable. Besides, even if in such cases the defence of laches were admissible the defendants would have to show that they had suffered a change of position by reason of the respondent's laches in which it would not be reasonable to allow him to assert his right." In Smt. Premila Devi v. Peoples Bank of N. India Ltd. [1939] 9 Comp. Cas. 1 (PC); AIR 1938 PC 284, it was held that (p. 13 of 9 Com. Cas.): "There can in truth be no ratification without an intention to ratify, and there can be no intention to ratify an illegal act without knowledge of the illegality." In Firestone Tyre and Rubber Co. v. Synthetics and Chemicals Ltd. [1971] 41 Comp. Cas. 377, this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entures, the plaintiffs could still have had no knowledge or means of knowledge that there was going to be the act of waiver of a precondition mentioned in the debenture trust deed immediately after it was executed. I am, therefore, unable to hold that the plaintiffs are estopped by acquiescence. A man may be said to have been guilty of laches if, after finding out that an act, which does a legal wrong to himself, has been done, he stands quiet for some substantial period of time. He may then be disentitled to relief by reason of laches. The plaintiffs can be said to have been guilty of laches if, after finding out about the act of waiver, they had stood quiet for some period of time. It is shown that at the June, 1979, AGM, the chairman stated that the institutions had exercised their options to convert and there was a discussion in this behalf. It is not shown, nor was it the defendants' case, that the fact of the waiver was disclosed or discussed or, for that matter, any disclosure was made which could have suggested that the act of waiver had occurred. At the first board meeting that was attended by the 2nd plaintiff in March, 1980, the balance-sheet for the year ended Decemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther document which contains an admission." There is nothing upon the record that indicates that the plaintiffs took unduly long to institute the suit after acquiring the requisite knowledge. Ratification may be said to have occurred when the persons concerned approve an act done on their behalf with knowledge of its irregularity or upon the basis that they endorse it, irregular though it may be. There is no evidence that the shareholders of the company ever came to know the fact of the waiver so that they could ratify it, nor is there any evidence that they intended to and did ratify the issue of the shares upon conversion, whether or not it was in order. I am entirely at a loss to understand how, in the circumstances, the acceptance of dividends upon their shares estops the plaintiffs from claiming relief. The plaintiff's conduct It was submitted by counsel for the defendants that the plaintiffs' conduct disentitled them to relief. The circumstances relied on by counsel for the defendants were these : That the plaintiffs had issued a false circular to get control of the company. That to the witness Goculdas, shown on the circular to be its signatory, the case has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be available to the institutions to try and outvote the Berlias and their supporters, if this became necessary, at the 1979 AGM. It was suggested that the company should be ordered to register the shares as on July 1, 1979, instead of June 5, 1978, that is to say, after the expiry of the notice period of one month, which had been waived. The exercise of the power of waiver has not been held by me to be bad by reason of some technical lapse which can be so cured. In the circumstances, the institutions cannot be restored to the position of being holders of convertible debentures with the option to convert 20% of the value thereof into shares during a stated period, and cannot, justly, complain of it. The institutions shall, however, be restored to the position of debentureholders who have already (but, in view of the finding, unfruitfully) exercised their option to convert. Equities will be adjusted in the sense that the institutions will hold in trust for the company such amounts as they have received from the company as and by way of dividends on the shares as are in excess of interest at the debenture rate of 11% and shall adjust them against future interest. I answer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e negative. Issue No. 34 In the negative. Issue No. 35 In the negative, not argued. Issue No. 36 This issue has been deleted. Issue No. 37 In the negative. Issue No. 38 In the affirmative, by reason of the mala fides of the waiver. Issue No. 39 In the negative, the suit is maintainable. Issue No. 40 In the affirmative, the plaintiffs are entitled to the relief. Issue No. 41 In the negative, not argued. Issue No. 42 In the negative. Issue No. 43 In the negative, the plaintiffs are not precluded or estopped from the challenge. Issue No. 44 In the negative, the plaintiffs have a cause of action. Issue No. 45 In the negative, the plaintiffs are entitled to the relief. 'Additional issues on behalf of defendant No. 8 in addition to those raised by defendents 1 to 7 : Issue No. 1 Not pressed. Issue No. 2 In the affirmative. Issue No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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